sameeragarwal

it depends on amount of control that can be inserted. In spite of having > 50% of the target company, if you are unable to exert control over the company, yes - Equity method can be used.

key point to differentiate (or an issue to understand) with regards to the equity method is that --> are you trying to make use of the equity method only for the purpose of reporting the share of the profits? Since you assets increase by a small amount - but you get a share of the profits - your performance measures ROE, ROA may be inflated using the Equity method. When you use Consolidation method - you are accounting for more of the assets. Additionally Net Profit Margin - in Equity method would be inflated - since you include earnings pro-rata share, but no sales. In consol - sales is also included - so your NI/Sales would be deflated with Consol. method.

CP